Standing Committee F

[Mr. Joe Benton in the Chair]

Finance Bill

(Except clauses 4, 19, 23, 26 to 29, 87 to 92, 131 and 134 and schedules 1, 5 and 38)

Schedule 18 - Relief for community amateur sports clubs

Howard Flight: I beg to move amendment No. 69, in page 238, line 37, at end insert
'and may include a club which is incorporated'.

Joe Benton: With this it will be convenient to take amendment No. 70, in page 239, line 22, at end insert—
 '(4) A club does not cease to be open to the whole community under (1) above if it has rules allowing it to expel members for inappropriate or disruptive behaviour.'.

Howard Flight: Good morning, Mr. Benton. I welcome you back to chairing our deliberations. I must apologise to the Committee because I must go and speak in the financial services debate at 11 o'clock. I hope that we shall have completed schedule 18 by that time, but if not my hon. Friends will take over.
 I hope that there is a chance of a stand part debate, because I recollect that when we were debating clause 57 before the holiday we had discussed its principle but had not wound up the subject. Amendments Nos. 69 and 70 are specific and seek to extend eligibility for the new relief to additional types of club. We want to stress the major point that the new relief is unnecessarily complex and restrictive. It would have been better to give qualifying sports clubs the same tax relief measures as those enjoyed by charities. The Law Society says that the relief is welcome, but that it will add to, rather than replace, existing tax reliefs. The relief will therefore add to the complexity of existing reliefs, and that could have been avoided by bringing all sports clubs under a single regime, which is something that we sought to redress with new clause 3. 
 I shall divert to apologise for having initially omitted to welcome the hon. Member for Wentworth (John Healey) to his new post of Economic Secretary to the Treasury, and I congratulate him on that. We share views about the importance of skills training and have spoken together about that. 
 The Law Society also comments that it should be made clear that ''clubs'' extends to corporate bodies, provided they have complied with amateur requirements. Although the principles in paragraph 2 are laudable, the question is whether they will impose unforeseen constraints on the clubs concerned. It should be clear, for example, that a club does not cease 
 to be open to the whole community because it has rules allowing its members to be expelled for inappropriate or disruptive behaviour, so an addition to paragraph 2 should be made. 
 The reliefs for donors in paragraph 9(3) should extend to include relief for a club from stamp duty on any assets that it acquires. The provisions allowing gifts of assets to charities should also extend to sports clubs. Paragraph 14 contains the definition of an eligible sport, which will be designated by statutory instrument. It might have been easier to include a list of sports in the legislation. Given the adverse tax consequences that follow from a club ceasing either to be registered or to hold property for qualifying purposes, surely a list of eligible sports clubs could be laid out in statute to create certainty on the core list of activities that can be undertaken to give rise to the relevant tax reliefs. The two amendments are designed to address those issues. 
 One point has come to my attention since our previous discussions. The Treasury proposals last November contained a specific pledge to permit 80 per cent. rates relief to qualifying sports clubs. That seems to have disappeared and the promised relief is less generous than that suggested by the Government during the election campaign. I have received many complaints from sports clubs that the package is not what they had been led to believe. We believe that parity with charity is the correct approach. The costs would not be hugely material but the administration would be much easier.

John Pugh: During the recess, I occupied myself usefully with this amendment by consulting the local sports council in Sefton, which is, as you know, Mr. Benton, a reputable and sound body. I gave it the good news about the tax incentives and benefits, but its response was a little muted because the world of large donations and trading incomes of £15,000 plus seems a little foreign to it. Its main interest each year is to get by without being in debt and its main financial preoccupation is meeting the rates bill. The registration scheme poses a dilemma: if it follows the route of charities, mandatory rates relief will be 80 per cent., but if it goes for registration, there will be no such benefit and discretionary rates relief from the local authority could be adversely affected. There was not enormous delight because the benefits were thought to be rather modest.
 One matter of concern, which is the thrust of the amendment, is that the Treasury has reserved to itself the right to define what is an eligible sport. There is an uncontentious mechanism to get around that and to get the Treasury off the hook. For all its expertise, the Treasury is not good at defining sports because it is not an area in which it has a substantial body of knowledge. I should have thought that eligible sports could be as well defined by Sport England as by anyone else and certainly better than the Treasury, unless the object of the Treasury in defining eligible sports is to control the rate of tax relief. 
 Will the Treasury evaluate whether the adjustment is successful in encouraging sports clubs? If there is no evaluation, there is a danger that what the measure 
 achieves might be cosmetic. I do not think that that is the Treasury's intention and it should explain how it will evaluate the success of the measure.

John Healey: It is a privilege and a pleasure to join this Committee, albeit in slightly unusual circumstances, and my hon. Friends on the Front Bench. It is a particular pleasure to join the Committee under your chairmanship, Mr. Benton, and that of your co-Chairman, Mr. Gale. It is clear from the Official Report that your firm and fair chairmanship has helped the Committee to make good progress.
 I could not help noticing in the Official Report that the first sitting was peppered with sporting metaphors from jousting to ''Just a Minute'' and from saloon car racing to stunt wrestling. My right hon. Friend the Chief Secretary to the Treasury, whose brief I have inherited but, confusingly for some, not his title--he is still a member of the Committee--was almost prescient in his reference to the World Wrestling Federation because I feel like a tag wrestler being introduced into the contest in the middle of a round. However, I shall do my best to pick up the excellent work that he has done and to play my part on the Treasury's excellent Front-Bench team. 
 Although we are discussing the narrow amendments Nos. 69 and 70, the hon. Members for Arundel and South Downs (Mr. Flight) and for Southport (Dr. Pugh) introduced points that range much wider. With your indulgence, Mr. Benton, I shall deal with them as well as the amendments. 
 I was disappointed to hear the hon. Member for Southport dismiss the clause as modest. In many ways, that talks down the value of the measures, which are widely welcomed by sporting federations and, more important, the local community sports clubs that they are designed to benefit. If the hon. Gentleman's experience in his constituency was reflected in his comments, I must tell him that it is not the universal reaction that many of my hon. Friends and I have had from sports clubs in our patch. 
 Both hon. Gentlemen raised the question of business rate relief. I am aware that sports clubs and some of their organisations are making a case for that, but I point out to Opposition Members that decisions on business rates are not for the Treasury but for the Department in charge of local government policy and finance. The matter cannot be dealt with in the Finance Bill. However, the measures in the Bill represent a generous package of support for local community sports clubs. 
 Both hon. Gentlemen also posed a question about the Treasury definition of sports.

Howard Flight: I am aware that the business rates issue must be dealt with under separate legislation, but Sport England's and my understanding is that it will entail relief of only 50 per cent., not 80 per cent., which everyone was led to expect.

John Healey: Business rates relief for sports clubs that are not charities is a matter of local discretion. A basic principle of local government introduces a
 distinction between charities and non-charitable sports clubs. If I may, I shall deal first with a further point that the hon. Gentleman raised in his brief introductory remarks and then revert to the question of who defines eligible sports and sports clubs.
 The hon. Gentleman's point that the measure does not offer full ''parity with charity'' is true. However, the Bill includes a generous package in parallel to what is available for charities. The Charity Commission's decision last November to recognise as charitable those sports clubs that are engaged in the promotion 
''of community participation in healthy recreation'' 
allows many sports clubs to achieve charitable status if they choose. The crucial point is that it is for the clubs to decide whether such a status suits their purposes and membership. 
 If clubs decide, for whatever reason, that they do not wish to be charities, there is no reason why they should enjoy exactly the same benefits as charities, as they would not have to fulfil exactly the same requirements and responsibilities as charities, which are regulated by the Charity Commission. We are trying to strike a balance between supporting the clubs and respecting and taking into account the interests of registered charities. 
 Let me turn to the question of the Treasury defining sport. The hon. Member for Southport said that he doubted that the Treasury had the expertise to make such judgments. My hon. Friend the Member for Bradford, South (Mr. Sutcliffe) might disagree with him, but the hon. Member for Southport is right. The Treasury will not take decisions about what should be classified as a sport. Sport England already has a list of recognised activities, and we have decided that it would be most appropriate—initially, at least—to link the definition of eligible sport for the purposes of clause 57 to that list, rather than have Treasury Ministers of whatever description proposing what should constitute an eligible sport. The matter can be dealt with by statutory instrument, which can be readily amended should circumstances require it.

John Pugh: Will the hon. Gentleman clarify whether he is suggesting that a sports council list will be accepted wholesale by the Treasury, which will authorise it, or is the Treasury in a position to pick from a menu of sports put forward by the sports council?

John Healey: Our intention, and my commitment to the Committee, is that we will use the list of recognised activities produced by the sports council in England, which will be the basis on which we frame statutory instruments that define which sports are eligible.

Roger Casale: I join colleagues in welcoming my hon. Friend to the Front Bench. I wish him well in his new appointment.
 I welcome the new measure. Will the Economic Secretary make it clear whether amateur football clubs are likely to be eligible? He will be aware that recently we have seen the disappearance of our community professional sports club to Milton Keynes—our local 
 Wimbledon football club is to go there. We are going to start a community amateur sports club—a new football club—called Wimbledon association football club. I shall certainly put my hand in my pocket to support that new venture. I hope that my donation and those of other members of the community will qualify for the new relief, which will help us on our way to replay the wonderful story of Wimbledon football club, which is starting again from scratch.

John Healey: This is new indeed: Wimbledon loses one football club to Milton Keynes, but gains another. My hon. Friend has always given strong support to constituency activities. I can confirm that football is on the list of recognised activities. Community amateur football clubs will qualify as eligible under the Bill.
 I should like to give an indication to the hon. Member for Southport of how we will approach monitoring the impact of the new provisions, and determining in the long term whether they have had the impact that we seek. I draw on his earlier observation to say that the Treasury alone does not have the expertise to make such a judgment; nor would it seek to make one alone. As the Chancellor undertook in the Budget, we will continue to assist with the development of community amateur sport, and will demonstrate and underline our continuing commitment to such clubs. We will do so in close liaison with the Department for Culture, Media and Sport and in dialogue with many other sporting interests. I am meeting my right hon. Friend the Minister for Sport on 3 July to discuss those issues. 
 I shall turn now to amendments Nos. 69 and 70. As the hon. Member for Arundel and South Downs said, the amendments seek to put beyond doubt a couple of points in legislation. Amendment No. 69 would ensure that incorporated clubs came under the legislation. Nothing in the Bill prescribes the form that a community or amateur sports club must take; nor should it. I therefore give an assurance to the hon. Gentleman and to other Committee members that an incorporated club would be able to register, provided it met the criteria for registering under the schedule. 
 Amendment No. 70 seeks to ensure that a club would not fail to meet the criterion of being open to the whole community because it had rules that allowed members to be expelled for inappropriate or disruptive behaviour. We do not intend to prescribe in schedule 18 detailed rules for every registered community or amateur sports club. We want to leave general rules relating to the conduct of club activities to good sense and to the wishes of club members; that is part of the clubs' autonomy. The Inland Revenue will take a common-sense view of those rules, and will be concerned only if a rule offends the spirit underpinning the criteria. Clearly, a club must be able to exclude members if the presence of those members is disruptive to the orderly running of the club. I am happy to put on the record an assurance that such a rule will not preclude a club from being registered as a community amateur sports club for the purposes of the provision. 
 On the basis of those two assurances, I hope that the hon. Member for Arundel and South Downs will withdraw the amendment.

Howard Flight: I thank the Economic Secretary for dealing with those two points. His response was entirely satisfactory. Under amendment No. 70, the broad rule would be open membership, but clearly that raises the issue of what the position would be with regard to expelling people who clearly acted improperly. Although the hon. Gentleman's response to incorporation was not crisp, it was satisfactory.
 Which amateur clubs will qualify for charitable status, if they wish to apply for it? Our understanding is that the Charity Commission will need to decide on the principle of whether an activity is capable of improving physical health and fitness. It has already made it clear that certain sports, such as angling, ballooning, billiards, crossbow, pistol shooting, flying, gliding, motor sports and parachuting will not meet that principle, and there may be others. Not all amateur sports clubs will have the choice between applying for charitable status and the package under the clause. If there were a choice, there would be more logic in saying that a certain package was less generous and that the other was the full charity package. 
 Moreover, amateur sports clubs have advanced the sensible argument that, with all the toing and froing, qualifying as a charity is a cumbersome, expensive and complex matter. If it were decided to give charities tax benefits, it should be administratively easier for them to qualify and apply for such benefits. We believe that the measure is unwise. People will misunderstand the situation. There will be a lot of hassle, for example, if certain gifts did not qualify, but would qualify if they were charitable. The cost savings are not worth the candle in terms of the national economy. Hassle will be created by a slightly different and ungenerous rule. The logic of the Economic Secretary's speech was not correct. For starters, many sports clubs will not qualify as charities.

Edward Davey: The hon. Gentleman referred to the limited cost of some of his ideas. Has he noted that, in the Red Book for 2003-04, the total cost of the proposal will be a mere £5 million? The extra costs of his ideas will be small.

Howard Flight: I thank the hon. Gentleman for that response. If hundreds of millions of pounds were involved, there would be a simple budget controlling argument. However, the amounts involved are not worth the candle. We remain strongly of the view that it is unproductive to have separate rules.
 However, with regard to amendments Nos. 69 and 70, we appreciate the Minister's comments, and he has answered our questions satisfactorily for the record. I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn.

Mark Hoban: I beg to move amendment No. 41, in page 240, line 28, leave out from beginning to 'and'.

Joe Benton: With this we may discuss the following amendments: No. 42, in page 241, line 1, leave out from beginning to 'and' in line 2.
 No. 43, in page 241, line 24, leave out from beginning to 'and'. 
 No. 44, in page 242, line 7, leave out 'income and'. 
 No. 45, in page 242, line 11, leave out from 'is' to 'the' in line 14. 
 No. 46, in page 242, line 17, leave out 'income and'. 
 No. 47, in page 242, line 19, leave out 'income and'. 
 No. 48, in page 242, line 22, leave out 'income and'. 
 No. 49, in page 242, line 41, leave out 'income and'. 
 No. 50, in page 242, line 42, leave out 'income and'. 
 No. 51, in page 243, line 3, leave out 'income and'.

Mark Hoban: The hon. Member for Southport was right to describe the relief as modest earlier. That point was amplified by both my hon. Friend the Member for Arundel and South Downs and the hon. Member for Kingston and Surbiton (Mr. Davey). As is pointed out in the Red Book, the relief will cost £5 million next year and £10 million in the fiscal year following that.
 I tabled the amendment because the relief is already restricted in so far as the income limits to which tax relief will be granted are set out in the Bill. For example, trading income is limited to £15,000, and property income to £10,000. There is a further restriction based on the proportion of expenditure and income that is applied for qualifying purposes. 
 Many sports clubs will find the task of trying to identify what income expenditure is to be applied for qualifying purposes onerous. I spoke to a couple of local sports clubs before the recess to identify what levels of expenditure they thought would be applied for qualifying. First, they said that that would depend on how the rules were interpreted, and that they would need more guidance than is given in the schedule. Secondly, by their interpretation, the proportions of qualifying expenditure would be very high. One club suggested that it would be 90 per cent., and another 78 per cent, of its expenditure. 
 We are imposing a burden on sports clubs that is perhaps not necessary. Most sports clubs earn very little surplus on which they can be taxed anyway. The vast majority of their expenditure is incurred for the purposes of qualifying. To force clubs to jump through further hoops to claim that relief places a disproportionate burden on them, one which runs against the spirit of what the Government are trying to achieve, which is to encourage clubs to grow and develop, and to stress their community aspects. Those who will have the task of leading and developing those clubs—the committee, the treasurers and the administrators—will spend a disproportionate amount of time trying to comply with the schedule. 
 I ask the Government to think about ways of lifting that burden. That is the spirit in which my amendment was drafted. I should like them to think seriously about whether the restrictions are necessary, or whether the provision places unnecessary regulations on sports clubs, which need all the encouragement that they can get to meet their objectives.

John Healey: I assure the hon. Member for Fareham (Mr. Hoban) that we have considered the issues that he raises, but there are problems with his proposals. Amendments Nos. 41 to 51 would break the link between the tax relief that community amateur sports clubs will enjoy on their income and the condition that they should spend that income on their main purpose of providing facilities for, or promoting participation in, an eligible sport. The amendments would provide community amateur sports clubs with tax relief on their income, without ensuring delivery of the intended outcome of providing facilities so that local communities can participate in sport.
 Clearly, the amendments would also open up some tax avoidance opportunities. I urge members of the Committee to consider the implications of the proposal. The requirement that the income should, as a condition of the relief given, be applied for the community amateur sports clubs' main purpose of providing sports facilities merely replicates the arrangements for charities, whose income is only exempt if it is applied for charitable purposes. There is no reason why such a condition should not apply to sports clubs, too. I hope that the hon. Gentleman will withdraw the amendments. If he does not, I shall ask my hon. Friends to reject them.

Mark Hoban: I am disappointed by the Minister's response. I had hoped for a more substantive reason than that of simply mirroring the rules for charities. The vast majority of the spending of many community amateur sports clubs' is on qualifying purposes. Two clubs in my constituency to which I spoke said that 70 to 90 per cent. of their income is spent on qualifying purposes. Although that sample is small, I believe that it is representative of community amateur sports clubs elsewhere.
 The clubs are under pressure from their members to ensure that membership subscriptions and income earned from bars are applied to the clubs' purpose, and to ensure that coaching and facilities allow members to enjoy the sports that they joined a club to participate in. 
 I really think that the measure places a disproportionate burden on sports clubs. The vast majority of clubs will spend the greater part of their money on qualifying purposes. They are under pressure to ensure that that happens because members are a very demanding group and they will ensure that money is spent properly in the interests of the club rather than on non-qualifying purposes. 
 I do not intend to press the amendment to a vote, although the Minister's response was disappointing. It will disappoint treasurers and sports clubs throughout the country who want help from the Government rather than a further layer of rules and bureaucracy. I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn. 
 Schedule 18 agreed to. 
 Clause 58 ordered to stand part of the Bill.

Schedule 19 - Capital allowances: cars with low carbon dioxide emissions

Christopher Chope: I beg to move amendment No. 18, in page 246, line 19, at end insert—
'(ia) is a car adapted to run on road fuel gas (with an applicable CO2 emissions figure not exceeding 240 grams per kilometre driven), or.'.

Joe Benton: With this it will be convenient to take the following amendments: No. 19, in clause 59, page 39, line 31, at end insert
'or
(aa) it is a car adapted to run on road fuel gas (with an applicable CO2 emissions figure not exceeding 240 grams per kilometre driven) or.'.
 No. 20, in schedule 20, page 249, line 29, at end insert— 
'''natural gas'' shall include ''road fuel gas'';
''road fuel gas'' has the same meaning as in section 168AB of the Income and Corporation Taxes Act 1988.'.

Christopher Chope: The amendments are important because they probe the Government's commitment to liquefied petroleum gas. The Government say in the Bill that there should be enhanced capital allowances for several low-emission vehicles, but not for others. I noticed that a press release issued at the time of the Budget said,
''100 per cent. enhanced capital allowances for low emission cars''. 
As with so many things, when one examined the small print, one found that that applied only to cars with low emissions of CO2 but not other pollutants. 
 The amendments would bring cars that run on LPG within the 100 per cent. first-year allowance. It would not address all cars that run on LPG, but cars that run on LPG and produce relatively low levels of CO2. 
 At present, it is not possible for an LPG car to meet the 120 g per km test but it is possible for such a car to meet the 240 g per km test, which is why the amendment has been drafted in such a way. There is suspicion that the Government are paying lip service to green technologies. However, when the ordinary man in the street thinks seriously of investing in an LPG-fuelled car or a dual-fuel vehicle, the Government start to go cold on whether they will provide a long-term incentive for such investment in greener technology. 
 The suspicions are not wild. They are supported by the Government's refusal to confirm that the fuel duty differential between LPG and other fuels—diesel and petrol—will extend beyond 2004. That is a near time horizon. I recently renewed my House of Commons pass and noticed that it now extends to 2006. We are dealing not with the renewal of a pass but with people investing in new models of vehicle. We should encourage vehicles that use both LPG and diesel or petrol and we should encourage people to consider LPG vehicles as a serious option. 
 Having read the Budget day press release, we read with some amazement the small print of the Bill, which states that LPG vehicles will be excluded from the benefit of 100 per cent. enhanced capital allowances, 
 notwithstanding the great benefits that accrue to the environment and people's health from LPG compared with diesel or petrol-powered vehicles. Box 7.1 of the Red Book shows the days on which United Kingdom air pollution is moderate or higher. UK air pollution is generated not by CO2 emissions, which impact on climate change, but by other pollutants that largely, especially in urban areas, result from the combustion of road fuels. In paragraph 7.7 on page 127 of the Red Book, the Government state: 
 ''Poor air quality poses risks to human health, quality of life and the natural environment. It affects everyone, particularly children and elderly people . . . In general, air quality in the UK is improving . . . But much . . . remains to be done . . . exposure to air pollution continues to be associated with an unacceptable number of hospital admissions and premature deaths each year.'' 
All Committee members would agree wholeheartedly with those sentiments. However, now the Government have the chance to give an incentive for people to invest in LPG-powered vehicles that also have low CO2 emissions, and they have missed the opportunity—unless they take that which the amendments present. 
 I remind the Committee of some of the benefits that flow from LPG compared with diesel and petrol, the significance of which is sometimes ignored. Although LPG vehicles tend to emit less carbon dioxide than do conventionally fuelled vehicles, no LPG vehicle can yet meet the 120 g carbon dioxide test. If that is the sole criterion for what constitutes low-emission vehicles, LPG vehicles will be unable to meet it. However, LPG engines are 50 per cent. quieter than diesel engines and marginally quieter than petrol engines. As we know, noise is a big issue for many of our constituents. LPG emissions of benzene are about one thirteenth those of petrol and half those of diesel. Petrol emits about two and a half times the amount of carbon monoxide emitted by LPG. 
 The health implications of particulates are the most significant factor. Recent tests have shown that LPG emits 99 to 99.8 per cent. fewer ultra-fine particles than even ultra-low sulphur diesel. For every 1,000 parts that enter the atmosphere as a result of burning ultra-low sulphur diesel, LPG results in only between about two and 10 parts. That is an amazing improvement in terms of reducing particulate emissions, and the Government and the Committee should take note of that. Also, vehicles that run on LPG emit one fifth of the level of sulphur dioxide that is emitted by petrol vehicles, and one ninth of the level that is emitted by diesel vehicles. With regard to oxides of nitrogen, LPG engines offer a 90 per cent. reduction of NOx compared with diesel, and a 40 per cent. reduction compared with petrol. 
 Therefore, if the Government truly mean to provide 100 per cent. enhanced capital allowances for low-emission cars, there is a case for including all LPG vehicles within that enhanced capital allowance scheme. In that regard, this amendment goes part of the way. It says, ''Let us go along with the overriding objective of reducing carbon dioxide emissions because of the impact of that on global warming, but let us also include LPG vehicles, which are reducing carbon dioxide to a slightly lesser extent, but which are 
 also producing corresponding and much larger benefits by reducing pollutants of other kinds that impact on the health and environment of our people.'' 
 I hope that the Government will take these amendments seriously, and that the Minister, in his response to the debate, will say something about why the Government are refusing to say anything about making a commitment with regard to extending the fuel duty deferential for LPG beyond 2004—which I hope that he will accept is a short-term horizon. 
 I hope that the amendments will find favour with the Committee.

John Pugh: I hope that you will forgive me, Mr. Benton, if my contribution ranges over several aspects of this schedule—and if it also, perhaps, refers to amendments that are yet to be discussed.
 The Minister said that I had been mealy-mouthed in my praise of his recommendations about community sport, and so on. I shall not be mealy-mouthed in this case. I shall not accuse the Minister or the Government of being insincere in their attempts to produce good behaviour by fiscal measures. They want us to use vehicles that produce less pollution, and thereby to create a better environment. 
 However, we must test what is being presented to us to discover whether it is a real improvement or simply a cosmetic improvement, and to see whether the recommendations, as they are currently framed, offer a sufficiently refined instrument to do the job. 
 There is a lot of premature optimistic talk about the environment and the absence of pollution. The Automobile Association states that, by the agreement of car makers alone, the Kyoto protocol's demands on motorists will be met in this country, and the Government White Paper of 1998 stated that there would be a 70 per cent. reduction in particulate emissions between 1996 and 2010. 
 All of that is good news and, in the Government's defence, we must accept that what we have before us is not an isolated recommendation, but part of a package—it does not stand alone, as I am sure that the Minister will say. However, we must ask ourselves whether the instrument is sufficient do the job that it is intended to do. 
 The Government have every encouragement to do a little more than they are doing at present. The recently published European Transport White Paper encourages Governments to go beyond the minimum goals. It states that the new Community rules 
''will help member states create the necessary economic and legal conditions for exceeding objectives.'' 
In other words, Europe is giving a green light—and a rich menu to choose from. However, the Government appear only to be encouraging purchasers of cars to choose a car that has a low rate of CO2 emission, with the intention of encouraging manufacturers to produce more of them. In one sense, that is a sensible strategy, because the vast majority of people will buy standard petrol cars that have CO2 emissions, and it is far better that they buy cars with low CO2 emissions. However, the legislation does not sufficiently benefit or highlight alternatives, to which the amendment refers. The European Commission set 
 targets of 2 per cent. for the use of biofuels to be reached more or less now, and 6 per cent. by 2010. It also set a target of 20 per cent. for replacing conventional fuels with substitutes by 2020. The legislation seems a long way from producing that by itself—it is not sufficiently hard-edged. The Government have an opportunity to offer severe fiscal encouragement to alternatives such as biofuels and natural gas, and, in the long term, hydrogen. 
 The Government say that they are looking ahead, and propose in clause 60 to encourage imaginative developments, but there are things that they could do now which, especially in the case of LPG and biofuels, could be done at little cost. On our way here today, few of us would have passed many LPG or biodiesel vehicles, and I assume that none of us passed a hydrogen-driven vehicle or would have recognised one had we done so. In offering fiscal encouragement, the Treasury is hardly hampering its finances but, in the long term, it could send an enormously important signal as to where the future lies. The Government have missed the opportunity to do so in this legislation, and I should like the Minister to tell us how they might do so.

Rob Marris: I should like to echo the comments of the two previous hon. Members who spoke, and urge the Government to reconsider. I am no expert on this subject and I would like my hon. Friend the Minister to tell us whether bioethanol or biodiesel are encompassed in the schedule, especially under the definition of diesel in paragraph 3(10). We should be encouraging the use of lower-polluting vehicles. At the moment, apart from milk floats, all vehicles pollute. The early returns on company car tax show that the Government have been very successful in encouraging the use of new types of cars. That change of behaviour is driven by—to coin a phrase—the fiscal regime introduced by the Government.
 I believe that we could go further, and I urge the Government to consider the amendment moved by the hon. Member for Christchurch (Mr. Chope) and the suggestions made by the hon. Member for Southport about examining biodiesel and bioethanol. Perhaps my hon. Friend the Minister would explain some of the technicalities of the subject. Why do the Government feel that it is not appropriate to take such steps at this stage?

Chris Grayling: I am delighted to hear a considerable degree of consensus about the issue in the Committee. I commend my hon. Friend the Member for Christchurch for the amendments that he tabled. There is no doubt that LPG is a growing market, and one that is encouraged by the Government. For several years, both Conservative and Labour Governments offered incentives to develop the LPG market. Over the past couple of years, the number of filling stations has risen more than fourfold, from approximately 250 to more than 1,100, and is expanding at a rate of one a week.
 There are some contradictions about the nature of the emissions from LPG vehicles, which have lower CO2 and much lower carbon monoxide emissions than petrol vehicles, for example, but which have problems relating to other pollutants that are produced. There are also benefits in relation to diesel vehicles. However, the practical reality is that LPG vehicles can offer a lower-emission alternative. Friends of the Earth recently highlighted the ability of a modern LPG car to meet the arduous standards established in Los Angeles, California—the smog capital of the world for many years—where there are tough restrictions on vehicle usage and emissions. Friends of the Earth believes that a modern LPG car can meet the criteria set in that environment. 
 Clearly, the Government should encourage the use of LPG vehicles in this country, but the issue goes further than that. We face significant energy problems in the future, and the Government face challenges in relation to future capacity for generating energy. The benefit that LPG offers is that it is, in effect, a by-product; it already comes from the process of extracting and refining existing fossil fuels. Given that this country has a substantial surplus of available LPG, compared with the demand and usage, encouraging the development of LPG when road use is growing can only help to improve the overall environmental picture. LPG already exists, so it must be disposed of or used. Thus making better use of a resource that is already being generated and is already available for use has to make sense, both economically and environmentally. 
 I hope that the Economic Secretary will reconsider this issue in the light of the comments made by Labour, Conservative and Liberal Democrat Members. My hon. Friend the Member for Christchurch has raised an important point, and the Government would do well to take it into account in this measure before the Bill receives Royal Assent.

John Healey: I start by welcoming the general support that the hon. Member for Christchurch has offered for using economic and tax instruments to pursue environmental objectives. He is rightly a very eloquent and strong champion of LPG, but in the context of clause 58 and this group of amendments, he is wrong to argue that we are ignoring the claims made for LPG. We already recognise the benefits that road fuel gas can offer and have introduced a range of other measures that can support such technology.
 Those measures include grant-based schemes, such as the PowerShift programme, which offers targeted incentives to assist with the cost of converting vehicles to run on alternative fuels; lower vehicle excise duty for alternative fuel cars; less tax paid by employees on gas-powered company cars; and, from 2003-04, gas fuel provided free by employers will be taxed at a lower rate than for a similarly priced petrol or diesel cars. Finally, the rate of fuel duty on LPG is much less than that for diesel or petrol at 5p a litre, compared with about 45p a litre for the other fuels.
 That brings me to the second point on which the hon. Member for Christchurch pressed me: the road fuel gas differential beyond 2004. First, he accused me and other Ministers of refusing to say anything about that matter, but that is not the case. He asked why we should not commit ourselves to continuing the differential beyond 2004. The answer is simple: the environmental case for maintaining that fuel duty differential beyond 2004 for road fuel gases, such as LPG, has not yet been proved, so the Chancellor and the Government will consider it on a Budget-by-Budget basis.

Chris Grayling: Does the Economic Secretary that accept that uncertainty is perhaps not visible to the public who are continuing to invest in converting their vehicles, so the Government risk leading people up the garden path if they discover that the existing cost-benefits may not be there in the future?

John Healey: That may be a pertinent general argument, but it is does not relate to clause 58 and this group of amendments for reasons that I shall explain later.

Michael Jack: I welcome the Economic Secretary to his post. Would he be kind enough to tell me on what basis the further assessment of the benefits of LPG will be made? Will that assessment be published?

John Healey: The focus of our concern in relation to clause 58 is CO2 emissions. The threshold that we have set is 120g per kilometre. So in the narrow context of that clause, the future relevance of LPG may come into play in relation to those criteria.

Michael Jack: Does that mean that the Treasury will discount all the possible health benefits associated with LPG in any further assessment of that fuel?

John Healey: Of course it does not. The point is that there is a narrow focus on CO2 emissions.
 As the hon. Member for Southport said, this is a modest, focused measure that must be seen as part of a package of environmental measures, using economic and fiscal instruments, which the Government have already introduced. I have described four or five of those, which are chiefly intended to encourage LPG development and use. It is in that wider context that arguments such as those advanced by the right hon. Member for Fylde (Mr. Jack) will be taken into account.

Christopher Chope: The Economic Secretary has made quite a dramatic statement. He has said that the environmental case has not yet been proved for continuing the duty differential between LPG and diesel and petrol beyond 2004. What evidence has he for saying that the environmental case has not been proved? His party is encouraging people to invest in LPG-powered vehicles. Are those people now to take the view that the Government themselves are not convinced of the environmental case for switching to LPG?

John Healey: On the contrary. We are talking here about a matter introduced by the hon. Gentleman. We are talking about a time frame—a time limit. Clearly, in a fiscal regime the purpose of a time limit is to concentrate the boost that a measure may give, and increase its impact, in the early days.
 I am merely saying that the case for extending the differential beyond 2004 is not yet proved. The decision on whether it has been proved will be considered, and any consequential decisions will be made by the Chancellor and the Government on a Budget-by-Budget basis. I hope that that is clear. 
 We are now on the territory entered earlier by the hon. Member for Epsom and Ewell (Chris Grayling). The hon. Gentleman was right to say that LPG could offer ''a low-emission alternative''. As he suggested, the schedule focuses on dealing with carbon dioxide emissions. As I have explained, we are encouraging the use of LPG vehicles in other contexts. 
 My hon. Friend the Member for Wolverhampton, South-West (Rob Marris) began on the same territory, and then moved off it. He urged me to consider the wider application of the measure. As I have said, it is designed to deal with reductions in carbon dioxide emissions. It is part of a wider package of measures, many of which benefit LPG users. 
 Let me explain a couple of technicalities. My hon. Friend asked whether bio-ethanol was included in the schedule. The answer is yes. First-year allowances will be available if carbon dioxide emissions—here we return to the main focus and reference points—are not more than 120 g per km. That, indeed, applies to other cars. 
 In pursuing the question of biodiesel, my hon. Friend asked whether there were other provisions encouraging the use of that fuel. The new low rate of duty, 20p below that of petrol and diesel, will do just that. 
 The hon. Member for Southport made a pertinent point. This was not an isolated measure, he said, but part of a package. He then asked whether that package itself would be sufficient. I suggest that he should regard the work we have done in this Bill, in last year's Bill and previously as policy and legislative work in progress. I refer him to the consultation paper that we issued in the summer of 2001, ''The Green Technology Challenge'', which was designed to encourage debate about further environmental issues that might be tackled through enhanced capital allowances and new technologies that might arguably merit support under such regimes. The hon. Gentleman should view that consultation as a sign that discussion and consideration will continue on a broader front.

John Pugh: I can understand what the Economic Secretary is saying. He is suggesting to the Committee that the basic problem is that we are not looking at a narrow enough focus when we consider the legislation. The legislation will give a tax break or benefit to people who choose to use low-emission CO2 cars rather than high-emission ones, but its object is to reduce CO2 emissions. A piece of legislation that encourages people to use low-emission cars but does not give a similar break to liquefied petroleum gas cars or cars
 that do not emit CO2 will create the kind of objections that we have brought forward. A simple adjustment to the legislation would provide those benefits for both cars that produce low CO2 emissions and cars that produce no CO2 emissions.

John Healey: I urge the hon. Gentleman to bear in mind the aggregate impact of the proposal on the wider package to which he drew our attention. If he will wait, I shall address the amendments after I have dealt with the general points that a number of Members have introduced. I was very struck by his point and will bear in mind his encouragement to us to introduce ''severe fiscal incentives'' for environmental ends.
 I now turn to amendments Nos. 18 to 20, which would, as the hon. Member for Christchurch said, extend the special 100 per cent. enhanced first-year allowances to all road fuel gases including liquefied petroleum gas. They would enable LPG-powered cars to qualify, even if their CO2 emissions were up to twice those of other qualifying vehicles. Amendment No. 20 would extend those first-year allowances to LPG refuelling equipment. 
 The amendments miss the point and purpose of the clause. It may help if I reiterate to the Committee the purpose of the new measures. Clauses 58 and 59 aim to encourage business investment in cars that emit the lowest amounts of carbon dioxide, to expand that market and further to encourage innovation in low CO2 cars. I do not need to tell members of the Committee that CO2 is the key greenhouse gas, and the scheme forms part of a raft of measures to help reduce the UK's emission of that gas to meet our Kyoto and domestic targets. It is not a scheme that aims to support all alternatively powered cars without regard to their CO2 emissions. It therefore focuses deliberately on those cars with the lowest emissions of that gas. Cars that meet the 120g per km limit can qualify for the first-year allowances regardless of how they are powered, and making exceptions for particular fuels runs counter to that purpose. Focusing on a single CO2 figure provides a straightforward and consistent measure for the application of the provision. 
 Clause 60, to which amendment No. 20 relates, aims to encourage the installation of refuelling equipment for new types of gas fuels, such as natural gas and hydrogen, that will potentially play an important role in future. It targets those new-technology fuels to help increase availability and reduce the barrier to greater take-up and innovation. 
 There are already 1,000 LPG outlets and the rate of expansion has increased considerably in recent years, with some 350 new refuelling points being installed in the last year alone. Given that growth, I am not convinced that there is a need for further tax incentives. 
 The Government recognise that road gas fuels such as LPG can deliver the environmental savings that have been ably articulated by a number of hon. Members this morning. That is why there are grants to 
 help people buy or convert vehicles to run on LPG. That is why employees with gas-powered cars pay less company car tax and, from 2003-04, will pay less tax on free fuel provided by their employers. That is why LPG attracts a much lower rate of fuel duty. In that context, I recommend that hon. Members reject the amendment.

Christopher Chope: The Economic Secretary's response is very polite and measured, but unfortunately I find the content extremely disappointing. He makes the assertion that the amendment would result in vehicles emitting twice as much carbon dioxide as the limit set out in the clause. He makes it seem as though that would be a disastrous state of affairs. Let me remind the Committee that the amendment would confine the 100 per cent. capital allowances to the top tier of vehicles on the PowerShift register. That is the top tier of low-emission vehicles. I do not think that the Economic Secretary has dealt with that problem adequately.
 PowerShift register bands reflect the emissions performance overall compared with prevailing European standards, currently known as stage 3 or Euro III. The key regulated pollutant emissions targeted by the Powershift programme are nitrogen oxide and hydrocarbons. To be eligble for PowerShift funding, vehicles must also offer clear reduction—compared with the conventional fuel alternative—in emissions of carbon dioxide responsible for climate change. If such vehicles comply with the top band under the PowerShift register, why are they not eligible for the 100 per cent. capital allowances? 
 The Economic Secretary said that because there were already 1,000 LPG outlets and there was an increasing use of LPG, he was not convinced that there was any need for extra incentives. At the moment, the proportion of vehicles in the vehicle park that are fuelled by LPG or indeed by fuels other than petrol or diesel is very small indeed. Every extra vehicle that we can get in the vehicle park that is a low-polluting vehicle is of benefit to the environment and the health of the people of this country. The Government have the opportunity to give a joined-up signal in the Bill. In other policies, they have linked the issues of air quality and environmental benefit, but in this case they seem to stick solely to the criterion of whether the vehicles contribute an enormous amount to the reduction in global warming, and have set a limit so low that even an LPG vehicle cannot meet the limit, given present technology. 
 It appears that the Economic Secretary may be motivated by the protection of the revenue resulting from the clause. If that is so, let us be open about it. Let him say that he does not believe that it is reasonable that the Exchequer should subsidise new technologies to the extent that we encourage. If that is his argument, we can debate it. However, it seems that the Government are duping people into switching to LPG, and after 2004 they will remove the fiscal benefits that come from having a lower rate of duty for an LPG vehicle. The Economic Secretary said that he did not 
 think that there was any need for extra incentives, but that view is not shared by his own Government's quango, TransportAction, whose website states: 
 ''The research also considered the importance of a number of market factors in influencing decisions to switch to clean fuels . . . The strongest concern was a lack of confidence in the Government maintaining the fuel duty differential''.
 I know that the Economic Secretary is new to his portfolio but, although he may have been convinced that there was no need for extra incentives or for maintaining existing incentives beyond 2004, I hope that he reviews his position in light of what TransportAction says. I repeat: 
 ''The strongest concern was a lack of confidence in the Government maintaining the fuel duty differential.'' 
I am told that a fleet manager or a car purchaser needs a long planning horizon; if an individual is not given an assurance beyond 2004 that LPG will be favoured by a beneficial tax regime from the Government, he may wonder what is the point of investing long term. At the moment, only Vauxhall and Volvo produce dual-fuel vehicles at a significant volume. The Government should encourage other vehicle manufacturers to invest in the technology, but they will not be able to do so if they are not prepared to extend their planning horizons beyond 2004; if vehicle manufacturers are to consider extending manufacturing lines and producing dual-vehicles, they need clearer signals of a longer time frame. I am disappointed that the Economic Secretary has not gone further than his colleague, the new Chief Secretary to the Treasury, went in a debate in the House last October; he also said that he could not say what would happen beyond 2004. 
 The amendment would restrict the capital allowance to vehicles that are at the top of the PowerShift register in terms of low emissions, so I hope that Committee members will press it to a vote. I hope that the hon. Member for Wolverhampton, South-West, who spoke so eloquently from the Back Benches, will join us by voting in favour of the amendment. He may be outvoted by his colleagues, but if he does rebel he will reflect the balance of debate in the Committee. Although Committee members from both sides—Conservatives, Liberal Democrats and Labour Members on the Back Benches—have spoken with one voice, the Minister has spoken with another. How can the people be sure that their spokesmen will take action against the Government when they are wrong unless those spokesmen join together and vote accordingly? I will be disappointed if the hon. Member for Wolverhampton, South-West does not vote with us. 
 I hope that the Minister realises that today's debate is another consequence of his Department using misleading language in its press releases. When the Inland Revenue issued its press release on 17 April, it announced the 100 per cent. enhanced capital allowances for low-emission cars. We now find that cars at the top of the PowerShift register will not qualify—we have discovered that only during the debate and as a result of reading the Bill's small print. If the Government had referred to 100 per cent. enhanced capital allowances for some low-emission 
 cars, it would have been a more accurate press release. I hope that the Economic Secretary will report back to his spin doctors that they have once again been involved in counter-productive spin.

Michael Jack: I wish to add to my hon. Friend's comments after reading paragraph 21 of the notes on clause 58 and schedule 19, to which the amendment refers. It says that part of the measure's purpose is
''to encourage a shift towards cleaner cars.'' 
 In his reply, the Minister used the sort of logic that says that, because the clause only defines—in this context—a cleaner car as one with lower carbon dioxide emissions, all arguments that support help for other forms of cleaner cars are off limits. He then told us that he felt that he had done his bit on behalf of the Government to encourage LPG cars because he had put before the Committee a range of other measures. That is a slightly bent piece of logic. It says that we will not have a consistent policy across all areas 
''to encourage a shift towards cleaner cars'', 
in the words of the Treasury. We will do some things in some areas but not in others. My hon. Friend the Member for Christchurch put his finger on the lack of consistency in encouraging the uptake of cars that use embryonic technologies. In CO2 terms, perhaps the LPG car is marginally behind best practice in diesel or petrol. However, in cost-benefit terms, the LPG car has many benefits, if one believes the science on the relationship between air pollution and health. 
 The Economic Secretary says that he is happy to sustain only a partial package to support cars that do not cause certain health problems. I hope that his conscience is happy with that, because one advantage of LPG emissions is that, in many cases, they do not present the health risk to the public that are presented by the cars included in the Minister's measure on CO2. At a time when the Government have told us that their priority is the improvement of the nation's health, it seems odd that they are ruling out help to do exactly what they want to encourage—in their own words, a ''shift towards cleaner cars''.

Rob Marris: I would like to say for the benefit of the Committee—certainly for the benefit of the hon. Member for Christchurch—that, despite the hon. Gentleman's eloquence, I am not convinced. I am reassured by the comments of the Economic Secretary, because he has said that the measure is part of an overall package, and I accept that. I am also convinced that the Government will keep the matter under review as time goes by. That is what is necessary to reassure me, and I am reassured.

John Healey: In the first place, let me reassure the hon. Member for Christchurch that I am far too junior a Minister to have any spin doctors to tell me what to do. The right hon. Member for Fylde urged consistency across the board. We face different challenges in the environmental field, and different measures are required to deal with them. It is less a lack of consistency and more a question of judgment about
 the appropriate economic and fiscal instruments for particular environmental objectives that underpins the clause and my arguments this morning.
 I am delighted that my hon. Friend the Member for Wolverhampton, South-West has resisted the sweet encouragement and temptations from Opposition Members. Finally, I say again to the hon. Member for Christchurch that the single focus and purpose of the clause is to tackle greenhouse gases and the global warming problem by reducing CO2 emissions from vehicles on the roads in this country. However, I shall pass on to my right hon. Friend the Chancellor the comments of TransportAction on the fuel differential duty and of the hon. Gentleman as very early representations for the Budget in 2003. 
 Question put, That the amendment be made:—
The Committee divided: Ayes 6, Noes 15.

Question accordingly negatived.

Christopher Chope: I beg to move amendment No. 85, in page 248, line 25, at end add—
 '7 In section 82 (qualifying hire cars), in subsection (1), in paragraph (b) substitute ''(3) or (4)'' with ''(3), (4) or (4A).''
 8 In section 82 after subsection (4) insert ''(4A) The fourth case is where the car concerned falls within subsection (1) of section 45D''.'.
 This is a short point. The amendment would extend the 100 per cent. allowance for low-CO2 emission cars to companies that lease cars to members of the public. That would widen the scope of that benefit so that individuals, rather than just corporate owners, could benefit. That could be passed on to private owners via lower leasing costs. I should have thought that that would be consistent with the Government's objective of ensuring that there is a higher take-up of such vehicles on our roads.

John Healey: As the hon. Gentleman explained, the amendment would ensure that cars with low carbon dioxide emissions that are for hire to, or for carrying, members of the public are excluded from those special rules that apply to cars that cost more than £12,000. I can confirm that the Bill will achieve that result, and will widen the benefit that the hon. Gentleman is keen on. The effect of the measure will be that all new business cars with low carbon dioxide emissions that are registered or purchased on or after Budget day will be excluded from the special rules that generally apply
 to cars costing more than £12,000. That includes low-emission cars for hire to, or for carrying, members of the public.
 I hope that the hon. Gentleman will regard his amendment as unnecessary and be prepared to withdraw it.

Christopher Chope: I am grateful to the Minister for that explanation, and I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Schedule 19 agreed to. 
 Clauses 59 and 60 ordered to stand part of the Bill. 
 Schedule 20 agreed to.

Clause 61 - Expenditure on green technologies: leasing

Christopher Chope: I beg to move amendment No. 17, in page 40, leave out lines 14 and 15 and insert—
 '(5) General exclusion 6 shall not apply to expenditure incurred on or after 17th April 2002.'.
 Again, this is a small issue, but it is important nevertheless. Many small and medium-sized enterprises make little or no profit, and so cannot use the capital allowances that are available. Giving those allowances to lessors would make cheaper finance available to small and medium enterprises that do not make big enough profits, as they could then ''sell'' their capital allowances to leasing companies. That would be helpful for small companies seeking such finance. I do not know whether such a provision is also incorporated within the Bill, but if it is not, it should be, which is why I tabled the amendment.

John Healey: This amendment would include expenditure on assets for leasing in all the first-year allowances schemes. Therefore, it significantly widens the rules introduced in clause 61, which target the special schemes that encourage investments in ''green'' technologies, to help the environment.
 It might be helpful if I explain why we have introduced clause 61. Some Committee members will recall the discussions of the Finance Bill that took place last year. Since then, we have continued to listen to representations, and considered carefully the case for extending the scheme to include assets for leasing. We are now satisfied that extending those special allowances to ''green'' equipment for leasing will ensure the widest assistance to the uptake of those technologies, for increasing environmental gain. That is the key aim of the ''green'' technology allowances. 
 The change will encourage all businesses to look towards ''green'' alternatives when they make their equipment investment decisions. That choice may be made by the user of the equipment, but it might also be made by the person who will lease, let or hire the equipment.
 The amendment misses the point and focus of the clause. If adopted, it would include expenditure on assets for leasing in all the first-year allowance schemes, some of which have different purposes—for example, schemes that encourage investment by specific kinds of businesses, such as SMEs. 
 I wish to explain why we remain unconvinced that there is a clear case for extending these schemes to include assets for leasing. If a lessor were to receive first-year allowances, he or she might pass much of the benefit to the lessee by reducing the rentals that the lessee must pay to use the asset, but the effect on each payment is likely to be small, as the value of the benefit would be spread over the term of the lease. It has not been convincingly shown that a reduction in rents would have any real impact on investment decisions by the businesses targeted by the schemes. Therefore, the costs would almost entirely be dead weight. 
 However, the Inland Revenue is continuing to have constructive discussions with representatives of the leasing industry, who have indicated that they generally welcome the Bill's proposals impacting on asset finance. I understand why lessors also want first-year allowances more generally, but at present the case for that has not been proved. I advise the Committee to reject the amendment—but I hope that, having heard my explanation, the hon. Gentleman might agree to withdraw it.

Christopher Chope: I am grateful to the Minister for that explanation. I am pleased that the Inland Revenue is considering further some aspects of the matter, and I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Question proposed, That the clause stand part of the Bill.

Peter Luff: I rise in search of information, and nothing else, because anything that reduces taxation and encourages ''green'' technologies is to be welcomed.
 Will the Minister say what are the qualifying energy-saving technologies that the clause deals with? The notes on clauses refer us to a website, but we cannot communicate with websites during Committee proceedings. We are told that, currently, there are investments in eight technology groups that are set out in the energy technology list, which was issued by the Secretary of State for Environment, Transport and the Regions—that takes us back a while. It remarks that, subject to state aids, further technologies will be added in late 2002. This clause is specific about the impact on cars and gas refuelling equipment, which are already dealt with in earlier clauses, but it is vague about what those other energy-saving technologies might be. How comprehensive do the Government intend the assistance to be? 
 I might need to continue for longer to allow the Minister to get assistance from his officials. I shall sit down and hope that he has the answer in front of him.

John Healey: It is always welcome to hear a contribution from the Opposition Whip. I suspect that he is anxious to fill time in the Committee's proceedings for his own purposes--in the same way that I am at present. I shall answer his specific question directly and add a couple of general comments that explain the purpose of the clause.
 Further technologies include: heat pumps for space heating; radiant and warm air heaters; solar thermal systems; further refrigeration equipment; and, of course, air compressor drain traps and monitoring equipment.

Peter Luff: Oh, of course.

John Healey: If the hon. Gentleman would like further details on each technology, I should be happy to provide them.
 The clause makes a small but significant amendment to the rules that determine the expenditure on plant machinery that may qualify for the first-year allowances. It enables businesses that incur expenditure on qualifying environmentally friendly plant machinery for leasing or hire to claim 100 per cent. enhanced capital allowances on their expenditure. The change applies to investments under new schemes for enhanced capital allowances for low-emission cars and gas refuelling equipment. Furthermore—this is the point that the hon. Gentleman raised—the change will extend enhanced capital allowances to energy-saving technologies under the scheme that we introduced last year to encourage investment. 
 To give a full picture, existing energy-saving technologies include combined heat and power boilers, variable speed drives, thermal screens for horticulture, lighting, pipe insulation and some refrigeration equipment. 
 The clause will ensure that such schemes reach the widest number of businesses and encourage the highest uptake of technologies for the widest possible environmental gain. The new treatment will apply to expenditure incurred from Budget day—17 April 2002—on qualifying assets for leasing. I commend the clause to the Committee.

Mark Hoban: Can the Minister clarify the concluding sentence in paragraph 6 of the explanatory notes? It says:
 ''Subject to State aids, further technologies will be added later in 2002.'' 
Does that imply that the Government must seek clearance from another organisation, such as the European Union, before further technologies can be added? Can the Minister tell us what the sentence means?

John Healey: I can, indeed. An established process should be conducted on this area of legislation, and that involves the European Commission. We are currently undertaking the process and we do not anticipate any problems with the proposals in the clause.

Mark Hoban: Is the approval that the Minister seeks based on technological aspects? Is the EU checking that the technologies are sufficiently green to be merited and that they conform to the Kyoto protocol and domestic or EU rules on emissions and other environmental aspects? Alternatively, is the Minister seeking approval from the EU on giving state aid to technology? The amounts involved must be fairly minimal, so why do we need approval on the financial aspects? Does the Minister want technological or financial approval?

John Healey: The hon. Gentleman may not like the European Commission, but it exists. The United Kingdom Government are signed up to follow the process. In a sense, the hon. Gentleman has answered his own question by referring to state aids. The principal worry about state aids is the distortion of competition. I reassure him that the process is under way. We do not expect that the European Commission will have problems with the proposals in the clause.

Peter Luff: I am glad that I raised that point. When we ask a question in Committee, we often receive a surprising answer. I represent the Vale of Evesham, which has many horticulturists and growers, and I know that they will be delighted to be the principal beneficiaries under the clause. Will the Minister be kind enough to write to me setting out details of how horticulturists and growers can benefit from the provisions and say whether any of the technologies to be added to the list are likely to benefit that sector?

John Healey: The hon. Member for Mid-Worcestershire (Mr. Luff) is much more of an expert on horticulture than I am, given that I represent a former coal- mining community in southYorkshire. I shall certainly make inquiries and write to him on that matter.
 I shall try to wrap up the concern felt by the Opposition—understandably from their point of view—about the European Commission and the European Union. In our judgment, the new technologies that we propose to extend under the clause will not give rise to state aid issues. We are not seeking state aid approval from the Commission, but we have undertaken to inform it if we make any subsequent changes to the provisions in last year's Finance Act. We are in the middle of that process, and we do not expect any problems to arise. I trust that my explanation has been sufficient.

Peter Luff: The horticultural sector knows that several state aids are payable to their competitor countries elsewhere in the European Union, which have escaped proper scrutiny. If any are scrutinised by the European Union, I hope that the Minister will be extremely robust in ensuring that British growers and horticulturists are not denied the advantage already enjoyed by their competitors in other EU countries.
 Question put and agreed to. 
 Clause 61 ordered to stand part of the Bill.

Clause 62 - First-year allowances for expenditure wholly for a ring fence trade

Christopher Chope: I beg to move amendment No. 99, in page 40, line 21, after 'first-year', insert 'and writing-down'.

Joe Benton: With this it will be convenient to take the following amendments: No. 100, in page 40, line 27, after 'first-year', insert 'and writing-down'.
 No. 101, in page 40, line 31, after 'amendments', insert 
'relating to first-year allowances'.
 No. 102, in page 40, line 32, at end add— 
 '(4) The amendments relating to writing-down allowances made by that Schedule have effect for chargeable periods beginning on or after 1st January 2003.'.
 No. 103, in schedule 21, page 252, line 4, at end insert— 
 '6A In section 56 subsection 7 shall be replaced with— 
 ''(1) The amount of the writing-down allowance to which a person is entitled for a chargeable period is a percentage of the amount by which AQE exceeds TDR, as shown in the Table—
 AMOUNT OF WRITING-DOWN ALLOWANCES
 6B In section 56 after subsection (7) add— 
 ''(8) The increased writing-down allowance for ring fence trades will only be available for chargeable periods beginning on or after 1st January 2003. 
 (9) In this section ''ring fence trade'' has the same meaning as in section 45F.''.'.
 No. 104, in schedule 21, page 255, line 30, at end insert— 
 '14 In section 418, subsection (1) shall be replaced with— 
 ''(1) The amount of the writing-down allowance to which a person is entitled for a chargeable period in respect of qualifying expenditure is a percentage of the amount by which UQE exceeds TDR, as shown in the Table— 
   AMOUNT OF WRITING-DOWN ALLOWANCES  Type of UQEAmount   UQE on the acquisition of a mineral asset 10% UQE for use wholly for the purposes of a ring fence trade50%  All other UQE 25%'' 
 AMOUNT OF WRITING-DOWN ALLOWANCES
 15 In section 418 after subsection (6), add— 
 ''(7) The increased writing-down allowance for ring fence trades will only be available for chargeable periods beginning on or after 1st January 2003. 
 (8) In this section ''ring fence trade'' has the same meaning as in section 45F.''.'.

Christopher Chope: This group of amendments is important. Committee members may have noticed the press statement that was issued on Thursday, 23 May on the politics section of BBC Ceefax. It stated:
 ''The United Kingdom oil industry is warning that up to 50,000 jobs could be lost owing to tax changes in the last budget. The changes including a 10 per cent. rise in corporation tax were a shock to the industry. The United Kingdom Offshore Operators Association said the extra costs will cost £8 billion in the next eight years.'' 
It warned that companies looking to develop new oil fields will bypass the North sea. 
 Given what the Chancellor said at the time of the Budget, the provisions are designed as a sop to the oil and gas extraction industry to soften the blow of clause 90, which we discussed on the Floor of the House. The clause gives a 100 per cent. first-year allowance for expenditure on plant and machinery, which is not a long-life asset used in a ring-fenced trade. It will help cash flows, but the amendments would give a larger benefit to the industry. They would give increased allowances to expenditure incurred before the introduction of the supplementary 10 per cent. corporation tax charge. 
 The UK oil industry points out that companies have already incurred much of the capital expenditure that generates income subject to the supplementary charge and that tax relief has already been given on capital allowances claimed to date against income taxed at the old rate of 30 per cent. The amendments would increase the rate of writing-down allowance available on existing capital expenditure to compensate for the higher rate of corporation tax. 
 Recent investments have been adversely affected by changes announced in the Budget. In recent years, the oil industry has been encouraged to invest. Indeed, not long ago—in the November 2000 pre-Budget report—the Chancellor of the Exchequer said that it had been put to him that North sea oil companies that earn higher profits from higher oil prices should be subject to special taxes, but that he was determined not to make short-term decisions based on short-term factors. He said that the key issue was the level of long-term investment in the North sea and that that would be the approach that would guide Budget decisions in future.

Rob Marris: Very good.

Christopher Chope: As the hon. Gentleman says, that was very good, at the time. Unfortunately, however, it is entirely inconsistent with what is in the Bill, as a result of which some companies have already announced job cuts. BP has announced that it will be cutting 800 jobs from its North sea operations, following closely on the 500 job cuts made a few months ago. It is also in talks to dispose of its Thistle field and is considering whether to decommission its North West Hutton field early in order to save costs. The Government's approach is inconsistent with their energy review in discouraging new gas field investment.
 The amendments are designed to mitigate the extremely adverse impact of the regime that the Government are introducing under clause 90 in increasing corporation tax by 10 per cent. I hope that 
 they will realise that they have made a mistake. One way of pulling back from that position would be to accept the amendments, which, without going into more detail at this stage, I hope the Committee will do.

Edward Davey: I welcome you to the Chair, Mr. Benton.
 I support the amendments. I congratulate the Financial Secretary on her promotion. Many hon. Members have been aware of her career in the House and wish her well in it. We are especially glad that she now holds that position and is responding on behalf of the Treasury Benches. She is an experienced and distinguished economist who has studied and considered economics and its effect on business in particular. I am sure that she will be prepared to admit to the Committee that the Budget proposals for the North sea oil industry will only reduce investment. That is the crux of the argument that Conservative Members and my hon. Friends the Members for Gordon (Malcolm Bruce) and for West Aberdeenshire and Kincardine (Sir R. Smith) advanced in the debate of the Committee of the whole House. Both sides of the House have tried to advance that key argument and, worryingly, the Government have tried to dismiss it. 
 The Government have tried to pretend that there will be no huge tax increase, but according to the studies that Professor Kemp has undertaken for the industry, the increase will be equivalent to £8 billion over eight years. Surely there is no way that the Government can pretend that such a tax rise can do anything other than hit investment. I hope that the Financial Secretary will at least be more frank with the Committee than her predecessor on that point. That is why these amendments are important; they would go a small way to relieving the huge tax increase faced by that sector, which is important for north-east Scotland and the rest of the United Kingdom. 
 The Financial Secretary will want to show that she remains loyal to the Government and to ensure that she continues the arguments that they have used, but she could show some flexibility. She could consider this and subsequent groups of amendments and say that they may represent a way for the Government to make some amends for the huge tax impost. That might be one way of showing that the Government have been listening and appreciate the negative impact of the measure, demonstrated by the job losses that have been announced and the loss of confidence in the industry. 
 Many of the press comments and some of the statements from the industry show that one of the most damaging impacts of the tax changes is the effect on confidence and on the good faith that the Government had previously built up with the industry. We must remember that the industry has to operate in the face of great instability, especially in relation to the oil price, which has fluctuated massively during the past 20 years. If the Government add extra instability to what is an inherently unstable economic system, they will tie British industry's hands in going about its 
 business. They would compound the huge mistake that they have made if they fail to adopt some of the amendments in this group. 
 Amendment No. 99 would make small amends by enabling the writing-down allowances to be doubled in the next year or so. That would not involve huge amounts of money, but it would follow the logic of the clause by attempting to provide extra relief via capital allowances. It would also show that the Government recognise that their tax measures are in some way retrospective. Many of the investments that will be effectively taxed under clauses 90 to 92, which were debated on the Floor of the House, now face much reduced returns. 
 Although the investment decisions were taken under a different tax regime, those involved now face an extra impost. Introducing the proposed extra writing-down allowance would go some way towards recognising the extra burden imposed on those investments. I hope that the Government will agree to the amendment, which is supported by Labour and Opposition Members.

Michael Jack: In following my hon. Friend the Member for Christchurch and the hon. Member for Kingston and Surbiton, I wish to underscore their arguments about the economic impact on North sea oil exploration. In dealing with the fields that are already in production, they have rightly drawn the Committee's attention to the fact that, in response to the request that I made when the issue was debated on the Floor of the House for the Government to justify why they wish to increase tax in this way, other members of the Committee and I received an economic case made out for a brand new oilfield that was immediately profitable at the end of its first year.
 That case involved one of those wonderful bits of Treasury and Inland Revenue mathematics that are given to Ministers so that they have an illustration showing that a positive result can be achieved. By the magic of adjusting the cash flow for the field in relation to the tax allowances, bingo, they managed to create a result that suggested that the proposal would be beneficial to the oil industry. It just goes to show that, with the right sleight of hand, people can prove anything they want by means of statistics. If the impact of the measure is concentrated on an existing field, however, those arguments do not hold up. I congratulate the Financial Secretary on her promotion, which is justified, but I now expect her to deploy her expertise in demonstrating that the proposal will have no negative impact on existing fields. 
 In taxation matters, there is always the question of retrospection. Because the measure will have an impact on existing investment made under a different regime, I think that—as was said earlier—some further relief is justified. In all areas of investment in the oil business there is great sensitivity to changes in the oil price. While the industry has a certain expertise in taking the long-term view, in a mature field or a declining field—indeed, in certain parts of the North sea fields—short-term price changes can significantly affect decisions about whether any further investment 
 is to be made in a currently active field, or whether it is worth using any of the new technologies to enhance oil extraction from fields that are approaching the end of their life. All that could well happen unless the amendments are accepted.

Ruth Kelly: I am delighted to return to the Committee after the short recess, Mr. Benton, particularly now that it is under your able chairmanship. I welcome my hon. Friend the Member for Wentworth to his new position, and look forward to working with him. I am sure that he will make a great contribution to the debate, and to the making and communication of Treasury policies.
 It is a pleasure to return to the debate on the North sea oil regime, which featured such enthusiastic and well thought-out contributions from Members on both sides of the Committee of the whole House. The quality of those speeches showed that Members take their commitments to their constituents seriously, and are acting as honourable representatives. At that time, however, the Opposition chose to decouple two parts of an extremely important package that I expect to create a stable, long-term fiscal regime for a significant part of the economy.

Michael Jack: Will the Financial Secretary clarify what she means by ''long-term''?

Ruth Kelly: The right hon. Gentleman knows very well that, in the pre-Budget report and in past Budgets, the Government set out their intention of creating a long-term stable regime for the North sea which raises a fair share of revenue for the country. The Budget set out the operation of that regime in detail, and companies should now have the confidence to invest while knowing that they are not operating in a system that is clearly unsustainable and unfair to most taxpayers and citizens.
 The clause and schedule introduce a new, generous system of 100 per cent. first-year allowances for capital expenditure incurred in the extraction of oil and gas in the United Kingdom and the United Kingdom continental shelf.The hon. Member for Christchurch described the new allowance as a ''sop'', but I completely reject the charge that it is a sop to the industry. The measure is very important because it will add to the industry's cash flow and provide additional incentives for the industry to invest. I do not agree with his analysis, or that expressed by the hon. Member for Kingston and Surbiton, although I welcome the kind remarks in his contribution. 
 I do not accept to any degree the charge that the investment allowance, which is part of the total package, will impact negatively on investment and jobs, because the package has been designed carefully. The investment allowance means that, even with the supplementary charge, companies investing in new projects will have higher post-tax rates of returns than under the previous rules. As I set out in the House when the clause was last debated, in terms of net present value the benefit of the allowance will 
 outweigh the additional tax for marginal projects. The effect on marginal projects will turn the effect on investment, and marginal projects will be encouraged by the change. The increased tax is designed to reduce the net present value of the more profitable fields, but such work is likely to go ahead in any event. The overall impact on investment is likely to be positive rather than negative.

Edward Davey: Is the Financial Secretary really telling the Committee that she believes that taking £8 billion out of an industry over eight years will not have a negative impact on investment? Is she really asking us to believe that?

Ruth Kelly: If the hon. Gentleman studies the speeches that were made in the House, he might convince himself that the measures have been designed so carefully that although they will clearly extract value from existing, more profitable fields, they will also increase the post-tax rate of return for investment in new marginal projects. Although that will have a cash-flow effect on companies, it will lead to greater investment and development. However, I do not want to rehearse arguments in Committee that we have already had in great detail in the House.

Iain Luke: Does my hon. Friend the Financial Secretary agree with me, and indeed with the Royal Bank of Scotland, that although the big corporate players may take corporate decisions that shift activity away, recent job losses show that activity is already being shifted away? The job losses were not a direct effect of the Government's proposals, but a function of previous corporate decisions about the market being taken up if there were a move by smaller, leaner companies that could invest profitably.

Ruth Kelly: I thank my hon. Friend for his intervention. It is right to point out in Committee that the industry had already forecast before the Budget that there would be an impact on jobs and activity over the coming years. We have to isolate that effect from the Budget measures, which will have a positive impact on both marginal investment decisions and jobs and activity in the future. Those two forces will clearly play out in due course.
 I am of course aware of some of the comment on those issues, but I should like to point to Tony Wood, senior economist at the Royal Bank of Scotland, who said: 
 ''We are concerned that negative publicity will impact on investment sentiment and do not see short term any negative impact from the budget.'' 
There is a risk of the industry exaggerating its concerns through self-interest. We must all be aware that pointing in an exaggerated fashion to potential effects that do not exist will have a self-reinforcing impact on the industry. I warn hon. Members not to get involved in that sort of scaremongering.

Ann McKechin: May I congratulate the Financial Secretary on her promotion? Does she agree that, had there been such a catastrophic effect on the industry as a result of the decision, we would have seen a marked drop in the
 share prices of the companies concerned? In fact, there was no sizeable or noticeable impact whatever in connection with the dividend prices of the major oil companies that operate in the North sea.

Ruth Kelly: I thank my hon. Friend for her kind remarks and her informed contribution, which builds on remarks that she made earlier. It is the case that there has not been a significant impact on the share prices of oil companies. We should interpret that in a positive fashion.

Edward Davey: Prior to the intervention by the hon. Member for Glasgow, Maryhill (Ann McKechin), the Financial Secretary warned the Committee and the industry that they should not make panicky statements and suggested that people should avoid scaremongering. Does she not realise that the greatest damage has been done by the Government? Having been in consultation with the industry through the pilot project, and having built up a degree of trust, the Government have suddenly changed the tax regime and created a fear that there will be future instability because the industry can no longer trust the Government's word. Surely that is the greatest long-term damage that has been done to the British North sea oil industry.

Ruth Kelly: I do not accept the hon. Gentleman's charge in any way whatever. We are committed to working with the oil industry, and to encouraging new investment, new exploration and development in the North sea. The proposals will make new investment more economic for oil companies, while extracting a fairer share of revenue for the taxpayer. The hon. Gentleman accuses us of inconsistency in the matter. I refer him to the statement in the pre-Budget report of 2000 when the Chancellor said:
 ''While it has been put to me that North sea oil companies, earning higher profits from higher oil prices should be subject to special taxes . . . The key issue is the level of long term investment in the North Sea. And this will be the approach that will guide budget decisions in future.'' 
In the Budget statement in 2001, he said: 
 ''As we consider the next steps for taxation in the North sea, our approach will be guided not by short-term factors but by the need for a regime that raises a fair share of revenue and promotes long-term investment in the North sea.''—[Official Report, 7 March 2001; Vol. 364, c. 299.] 
Those are the guiding principles that the Government have set out, which we have communicated to the oil industry. The industry knew that it was not contributing a fair share of revenue to the taxpayer. It knew that change was inevitable and that the taxpayer deserved a greater contribution from the industry. We have designed the measures to make investment more profitable in future, and to encourage investment and job-creating activity.

Edward Davey: The Financial Secretary says that the industry knew that there were going to be changes. Is she telling the Committee that the Government actually consulted the industry on such a tax change?

Ruth Kelly: I am saying that the Chancellor set out very clearly in his Budget statement the approach that we were going to take to the North sea fiscal regime. What we have done is completely consistent with what was said at the time. Of course, no industry likes paying more tax, and I am not for a minute going to suggest that North sea oil companies are jumping up and down saying ''Thank goodness! The Chancellor has finally decided to force us to contribute more revenue to the Exchequer.'' However, I am saying that what we have done in the Budget is totally consistent with the approach set out in previous years. Any objective assessment of the situation that the oil companies might have chosen to consult would have suggested to them that more tax was going to be raised from the industry. We have designed the tax measures in such a way as to have a positive impact on the economy and the outcome is an important, significant and positive one for jobs and activity.

Michael Jack: The Financial Secretary has outlined the care with which the measure was considered. Will she therefore share with the Committee the Treasury's estimate prior to the Budget for North sea investment over the next eight years? Can she also tell us the figure that she is working on post-Budget?

Ruth Kelly: As the right hon. Gentleman well knows, we do not give, in aggregate or individual terms, forecasts of that detail. Particularly for North sea oil companies, it is straightforward to draw individual conclusions from aggregate data. For reasons of commercial confidentiality, we cannot share that with the Committee. As he knows, I set out in the House the criteria that were used to consider the matter.
 I should turn to the specifics of the amendment, rather than rehearse recent arguments on the Floor of the House. The group of amendments with the chargeable periods commencing on or after 1 January 2003 provides an increased rate of writing-down allowance at 50 per cent., instead of the current 25 per cent. for expenditure already incurred by companies. I urge the Committee to reject the amendments. 
 I note that the hon. Member for Kingston and Surbiton said that it would not cost the Government much to accept the amendment, but the Revenue estimates that it would cost us up to £1 billion over the next two years, and that it would do nothing to increase investment in the North sea. The money incurred would be a pure deadweight cost and would mean a transfer of a substantial sum of money from the taxpayer to an industry that has already made good returns from the North sea recently and will continue to do so when the Bill's changes are introduced. 
 To accept the amendment would be neither sensible nor necessary. Our Budget changes have been carefully analysed and we have assessed their effects on all project categories, including future ones. We know of not one single project that would be made uneconomic by the Budget changes.

Michael Jack: In giving us a figure for the cost of the amendment, can the Financial Secretary share with us the basis of that calculation? How much investment would the amendment give relief to?

Ruth Kelly: I made it clear that the amendment is backward-looking and will do nothing to stimulate new investment, which is why we resist it. We have produced a system with a sensible marginal rate of tax on profits from a natural resource, and which has maximum incentives for investment. It is a principled and sustainable regime that is far more likely than the outgoing one to be durable of cycles.

John Burnett: I congratulate the Financial Secretary on her appointment.
 I apologise for not being here for much of today's debate. Furthermore, I have not given the provisions detailed study. However, I should like to raise a common-sense point that may have been covered on the Floor of the House or in Committee. Is the new 100 per cent. allowance flexible? We all know that the up-front costs of investment are high, and that profits are slow in coming, so can the Financial Secretary confirm that any unused allowance can be carried forward until the allowance is completely exhausted?

Ruth Kelly: I am extremely pleased that I gave way to the hon. Gentleman because he made an interesting and considered point. I am happy to be able to say that the answer is a definitive yes. If the allowance is unused when, for example, a new entry comes into play and it makes losses in the first year, the allowance can be carried forward and the full allowance can be taken up in due course. Taken as a whole, the regime that we have created will encourage investment, activity and job creation. This package is good for the economy. Our regime will be better for the industry and the country, and I therefore encourage the Committee to reject the amendments.

Howard Flight: May I raise the specific issue of mothballing? My understanding is that mothballing extends the life of a field and is something that everyone wants to see in the national interest, as opposed to shutting down, which means, ''That's it''. I do not understand why the new capital incentives will apply to shutting down but not to mothballing, which, if anything, is entirely the wrong way round. It is rather crackpot not to give mothballing the capital allowance. Why is it there for shutting down?
 I apologise for being away. I intended to ask a question rather than make a separate contribution. My specific point needs explanation.

Michael Jack: I listened with interest to the Minister's reply to this debate. I would like to pick her up on her retreat into ''commercial and in confidence'' when we questioned the economic arguments underpinning the Treasury's position. Magically, when matters are flowing in the direction of the Treasury and the world outside is saying, ''Thank you very much for this good idea'', estimates of great increases in investment and economic activity are scattered around like confetti.
 However, when the going gets tough and people start saying, ''How did you make this calculation and what is the economic impact?'', we find that the shutters come down.
 I draw the Minister's attention to a letter sent to her on 15 May by the UK Offshore Operators Association. Interestingly, commenting on a debate on the Floor of the House in which the same argument was used, the Director General, Mr. James May, writes: 
 ''Having consulted my members (who provided this data)''— 
the economic information that we discussed a moment ago— 
''they are firmly of the view that the data, provided in aggregate, is not of a commercially sensitive nature and they would encourage you to release it at the earliest opportunity. UKOOA Members regularly share and publish this aggregated data, as in our annual Economic Report.'' 
I did not ask for figures oil company by oil company. I asked for the numbers, which the Treasury must have. If the Minister were truly confident of the impact of the measure, she would have no hesitation in sharing in public the Treasury's analysis. The Treasury must have had a figure for investment to have calculated the cost of the measure. The Minister knows exactly what the numbers are, because otherwise she could not have put to the Committee a moment ago an estimate for the cost of the amendments tabled by my hon. Friend the Member for Christchurch. 
 If the Minister knows the cost, she knows the amount of investment affected, and, if she is as confident of her position as she says, it is remarkable that she is not prepared to share the numbers with the Committee. In the age of freedom of information that we are rapidly moving towards, it will be interesting to see how she could defend, in terms of the public position, not sharing with the House of Commons the basis of an argument that would enable us to understand more clearly the economic assumptions that have been made. Indeed, the industry invited the Minister to share such information with us. I am interested to know why the Minister is so reluctant. 
 The Minister will also be aware of a letter that I am sure was circulated to her. Having had an opportunity to assess the current situation, UKOOA members wrote to the Chancellor on 6 June. The Minister said in her opening remarks that the Government want to create a period of long-term fiscal stability. I asked her what she meant by ''long-term''. She replied that the Chancellor said that the Government want the North sea regime to be long-term and stable, but I wanted to know how many years should be read into ''long-term''. 
 On the subject of the measure to which the amendment relates, UKOOA's letter to the Chancellor says: 
 ''This is a marked feature of the proposals, and a change from historical practice.'' 
The Government have signalled a significant change by introducing an element of retrospection into the measure, a factor that the Minister did not mention. If I have got that wrong, I shall be the first to apologise. As I have not had the benefit of the briefing that she has received, I may have misunderstood what UKOOA goes on to say.
 UKOOA says that without the ''transitional relief'' proposed under the amendments advocated by my hon. Friend the Member for Christchurch, the current proposals 
''will have a significant detrimental effect on investments''. 
The hon. Member for Glasgow, Maryhill said that the share price of the oil companies did not go down when the measure was announced. She lives in an odd world that does not recognise the international mobility of investment money. 
 One of the arguments for amendments Nos. 99 to 104 is that they will help to sustain investment in the United Kingdom offshore fields, and not allow it to move to potentially more profitable areas. I am not surprised that the share price did not go down, as people in the markets would have said, ''Fine; some of the investment money that we might have made in the UK offshore fields will go elsewhere.'' In particular, it will go to Scotland and those constituencies on the west coast that are benefiting from some of the oil and gas development there. It will be to the UK offshore fields' detriment that that investment goes elsewhere. 
 I do not wish to rehearse the arguments that we had on the Floor of the House, but it is evident that there are more profitable areas than the UK continental shelf for investment in oil. [Interruption.] I can hear that the Royal Bank of Scotland is ringing up to agree with my arguments. I am delighted that it pays so much close attention to our debates. The Minister may well be able to sustain her position, but unless she can justify it more specifically, there will be deep suspicion that she is resisting the amendment because the proposal in the Bill represents a smash-and-grab raid by the Chancellor on a source of money that he has decided he wants.

Edward Davey: I rise again because I was not happy with the Minister's reply. I have also been informed of a point that has not yet been raised, which is that smaller fields and companies tend to lease, not purchase, their equipment. They have therefore profited from 100 per cent. relief on such leasing, but the clause does nothing to help them offset the new tax. Such smaller companies, which are often the most innovative—and are trying to develop the marginal fields that we have heard so much about in the Government's defence of themselves—will not benefit. They will be hit by the 10 per cent. tax and will have no offsetting allowances.
 If the Minister is trying to tell the Committee that the new structure will be beneficial to investors in the long term because the marginal fields will benefit, she shows that she and the Government do not understand how the industry works through leasing for small companies and fields. I hope that the Government will take that on board, and that if the Minister speaks again she will give more assurances to the Committee and the industry that the Government will think again about the measure and will consider the amendments under discussion.

Ruth Kelly: I very much enjoyed hon. Members' contributions on the point raised by the hon. Member for Arundel and South Downs. We shall return to that
 point under a later amendment, but I will say that the 100 per cent. allowance for decommissioning covers the mothballing of infrastructure at the end of a field's life. We may want to return to that point when we discuss amendment No. 109.
 The right hon. Member for Fylde has made several accusations that I do not accept. He talked about the shutters coming down, and the Government's unwillingness to share our economic analysis with hon. Members. I set out in considerable detail our methods of economic analysis, and the economic appraisal assessment that we used in developing these policy ideas, on the Floor of the House—which gave an opportunity for hon. Members on both sides of the House to cross-question and carefully scrutinise them. Indeed, that opportunity was taken up, and I do not intend to rehearse again today the arguments that we went through at that time. 
 The right hon. Gentleman mentioned the letter from the industry association, which says, ''We have lots of figures, and we do not mind if they are put in the public domain, and the Treasury should do the same.'' The figures that we are talking about are not industry figures; industry figures are incomplete. We are talking about the release of Inland Revenue and DTI information, which is commercially confidential. The industry association does not represent all the companies in the North sea. 
 However, Committee members are, of course, able to find out the estimated cost of the Budget measures and the forecast tax receipts, which are published in the Budget. Therefore, no one could accuse the Government of having the shutters down, and of not being prepared to share our analysis with hon. Members. 
 The right hon. Gentleman also talked about what we consider the long term to be. I have set out the criteria on which our assessment of the fiscal regime was made. The right hon. Gentleman accused the Government of imposing an element of retrospection. I do not accept that that is the case. The measures will come into force as they are introduced. Of course, the industry has made plans on the basis of different tax policies, just as ordinary individuals in life make plans on the basis of a particular tax regime. When tax rates and reliefs, and so on, are changed in the Budget and those individuals have to adjust, we do not say that that is retrospective, and nor should we say that the regime that we are introducing in the North sea is retrospective. 
 Not a single person or company has come to us and said that a single project will be made uneconomic by the changes that we shall introduce. In fact, serious analysis has been published that shows that the impact on investment from these changes will be positive.

Mark Field: A distinction should be drawn between individual taxpayers and the oil industry on two grounds; first, the substantial effect that this will have on the oil industry, and secondly, and perhaps more importantly, the fact that the oil industry was—so we are told—kept as an integral part of this entire process, because it was part and parcel of the industry
 consultation that allegedly took place prior to this happening. However, as we all know, the oil industry has been surprised by the recommendations.
 Therefore, there is a fundamental difference between the adjustment that an individual taxpayer makes and that which is being imposed on the oil industry as a result of these measures.

Ruth Kelly: As I explained to the Committee, I do not expect an industry to rejoice when additional tax is imposed on it; it would be extraordinary if it did. However, for reasons that I have explained, I do not think that this sort of change to the fiscal regime cannot have been anticipated.
Mr. Flight rose—

Ruth Kelly: I give way, although I wish to make progress.

Howard Flight: Is it not the case that, when my right hon. Friend the Member for Fylde was a Minister and changes were made to oil taxation, they did not apply to revenue flows from investments that had already been made? These measures are understandably seen as newly retroactive because, due to the huge amount of capital investment in the industry, the precedent with regard to the oil industry has been not to apply them to projects that are already in hand. As the Minister knows after being encouraged by Pilot, the industry feels that it has been cheated by the Government and sucked in to make investments and commit capital. A 33 per cent. increase in taxation has been applied on those committed investments. On past precedent, that is in bad faith.

Ruth Kelly: I am grateful that the hon. Gentleman made clear—for the sake of both myself and the Committee—the difference that he understands between retrospection and retroactivity in this case. However, as I have spelled out, and perhaps laboured, the purpose of the tax changes is to encourage new investment and the development of marginal fields. Of course, previously profitable fields, many of which incurred investment at a time when the rates and the amount that was expected to be paid to the Revenue were much higher than today, will have to pay more. That is part of the package's purpose. We are interested in encouraging investment while securing a fair share of revenue for the Treasury.
Mr. Chope rose—

Ruth Kelly: Perhaps the hon. Gentleman will let me make progress to deal with the point on leasing raised by the hon. Member for Kingston and Surbiton.
 Lessors will not pay the supplementary charges on their profits even if they are leasing assets in the ring-fenced area. Therefore, extending the scheme to lessors who are outside the charge would give relief in circumstances in which there is no reason for that.

John Burnett: I am sorry to have sparked an esoteric sub-debate. Can the Minister make it clear whether a lessor leasing for the purposes provided for in the Bill will receive the 100 per cent. allowance so that that tax benefit can be passed in due course to the lessee in whole or in part?

Ruth Kelly: I should like to make it clear to the Committee that the normal 25 per cent. allowances available to lessors that already assist lessee companies that are not paying tax will continue under the new regime. Investment in the North sea currently totals more than £3 billion a year. Only a tiny part of that investment is leased assets. We believe that that reflects the specific nature of the oil industry, which is generally quite profitable and may rely on equity finance to fund its investment. Of course, we will monitor closely the operation of the regime to ensure that there is no distortion in the system.
 I heard what hon. Members said about this, but we believe that the current operation of the regime and the 25 per cent. allowance is sufficient.

Christopher Chope: The Minister said that the amendment would cost £1 billion a year. Will she tell the Committee the cost to the Exchequer of the present proposals in the clause?

Ruth Kelly: The cost of the proposals and forecasts of tax receipts are clearly shown in the Red Book. I have set out the way in which we undertook the assessment in great detail. The pure dead-weight cost of the hon. Gentleman's proposals would be £1 billion, which is why I urge hon. Members to reject the amendment.

Christopher Chope: We have had a very disappointing response from the Minister. Let us deal with costs. She said that the amendment would cost £1 billion and that we know the cost of the clause to the Exchequer, but we do not. We know only what is in the Red Book: the net increase in yield to the Exchequer of the measures that relate to the North sea oil regime.
 I am asking a perfectly reasonable question: what will the cost be to the Exchequer of the first-year allowances that are set out in the clause? The Minister is stonewalling and refusing to respond. Much as we congratulate her on her well-deserved elevation and promotion, I must say that, in light of what she has said during this debate, many people in the oil industry will regret the fact that her portfolio will not be transferred to the Economic Secretary, who has just arrived on the Front Bench.

Ruth Kelly: For the record, perhaps I may set out the cost of the measure. In 2002-03, it will cost £400 million; in 2003-04, £650 million; and in 2004-05, £500 million. Perhaps that will satisfy the hon. Gentleman that I am taking this issue seriously.
 It being One o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order. 
Adjourned till this day at half-past Four o'clock.